Yahoo! Microsoft Alliance Approved

Last July, the long anticipated Yahoo-Microsoft ten year deal was announced, after a number of futile attempts by Microsoft to purchase and work with Yahoo over the previous years. Yahoo quickly learned that saying no to the $47.5 billion offer in 2008 resulted in sagging profits and a slumping stock ever since, with share prices being at just half of what they were offered by Microsoft, $33 per share, during the May 2008 hostile bid.

Late last week, it was announced that after much waiting, US and European regulators had cleared the partnership and the two search engines are now free to form the Yahoo! and Microsoft Search Alliance. This alliance is currently only valid in the United States and the European Union with additional countries being added on a staggered schedule in 2011.

The Yahoo! and Microsoft Search Alliance will benefit advertisers by utilizing the Microsoft AdCenter as the single platform advertisers may access and manage their advertising campaigns, with Ads being served to both the Bing and Yahoo! search engines. Additionally, Ad inventory from Microsoft and Yahoo! will join a new marketplace powered by Bing. This marketplace has an audience of over 500 million searchers worldwide.

Obviously, this last benefit to users is a move geared towards ganging up on Google, which currently receives two-thirds of the world’s search queries (according to comScore).  This alliance was approved by the US Department of Justice and European Commission as they felt Google was so far ahead of both Yahoo! and Microsoft in the search market, this deal would open up a greater competitiveness in the marketplace.

However, early last year a proposed partnership with Google and Yahoo had just fell apart, due to the US Justice Department threatening to sue to block the deal on “antitrust grounds”. Yahoo wanted to fight it, Google walked away.

This new alliance with Microsoft is eventually expected to boost Yahoo!’s annual profit by $500 Million with Yahoo! receiving $150 Million to start in April, and Microsoft taking 400 of Yahoo!’s total 13,900 employees.  The large majority of profits for Yahoo! aren’t expected to start flowing in until next year.

When the alliance is eventually rolled-out to other countries in 2011, Microsoft will manage the technology platforms that deliver the search results (Bing) and the paid search results will be served by AdCenter. The only part Yahoo will play in search after the alliance is entirely rolled-out is support via its sales teams, which will be supporting high volume advertisers (agencies).

For now, there is no change to advertiser’s accounts or services with either search engine in Canada, with expected final alliance roll-out  in late 2011. Read more about the Yahoo! Microsoft Alliance.